House of Commons Hansard #137 of the 37th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was c-48.

Topics

Income Tax ActGovernment Orders

10:40 a.m.

Liberal

Bryon Wilfert Liberal Oak Ridges, ON

Mr. Speaker, was that a question or an editorial comment? I assume the member is supportive of the fact of a reduction from 28% to 21% by 2007. The fact is the industry came forward. The industry is obviously anxious to see the legislation go through. We do not want to wait. We need to get it through.

Obviously, if the industry can live with this five year phase-in, although as I pointed out to the member that the exception of a new mineral exploration credit will only take three years, if the provinces can live with it, then I hope the member can live with it. I certainly respect the fact that the member is concerned about the legislation. I thank him for the question.

The reality is that after the consultations, after the discussion before the Standing Committee on Finance where no amendments were proposed, if we get this through in a timely fashion, we will be able to deal with the very issues with which that member has indicated he is concern.

Income Tax ActGovernment Orders

10:40 a.m.

Bloc

Serge Cardin Bloc Sherbrooke, QC

Mr. Speaker, I have a question for the hon. member opposite.

When the government is considering changes of such magnitude, I presume it develops models and makes projections.

Could the hon. member tell me what these projections are? Can he confirm that all sectors in the natural resources industry, all the mines and the oil companies, will benefit from these changes? As far as the oil industry is concerned, we know for certain that a $250 million surplus will be created rather quickly.

What will the impact be on each category of mines? Will all of them benefit from these lower taxes or tax changes? Can the hon. member tell us honestly if there will be differences and what they will be?

Income Tax ActGovernment Orders

10:40 a.m.

Liberal

Bryon Wilfert Liberal Oak Ridges, ON

Mr. Speaker, there is nothing like asking a question when the answer is already known, and I assume the member knows the answer. Yes, overall this will have a positive impact on the industry.

There is no question that some specific individual companies may benefit more than others. The industry accepts that. The Mining Association of Canada has made it very clear that even though some may not benefit initially and others may benefit greatly, it wants to see the legislation go through. It would not be fair to tell the member that everyone will benefit on day one. Clearly, overall the vast majority will benefit significantly because of these measures.

Income Tax ActGovernment Orders

10:40 a.m.

NDP

Joe Comartin NDP Windsor—St. Clair, ON

Mr. Speaker, in the process of developing the provisions of Bill C-48, did the government take into account the impact of the continued burning of fossil fuels, whether it be gas, oil or coal?

More particular, has there been any meaningful consultation by the government with environmental groups that have positioned themselves in a very clear fashion about the continued and now expanded use of incentives for the oil and gas industry and the coal industry?

Finally, in developing Bill C-48 was any consideration given to the facts that have now come out in the Conference Board report of this past weekend. That report states that of the 24 leading industrial countries in the world, Canada produces more carbon dioxide per capita from the burning of fossil fuels? We are the absolute worst country out of those 24 countries.

Have any of those factors been taken into account in coming up with these kind of subsidies for the continued subsidization of the oil and gas industry?

Income Tax ActGovernment Orders

10:45 a.m.

Liberal

Bryon Wilfert Liberal Oak Ridges, ON

Mr. Speaker, I am not quite sure that I understand the question. The fact is these are tax measures. I mentioned some environmental aspects, but this essentially is a tax bill. It is there to benefit provinces such as Nova Scotia and the oil and gas industry. It is to put Canada on an internationally competitive advantage with others, and in particular within the North American sector.

He specifically asked about coal burning, et cetera. That is not specifically germane to this bill. I understand the member has concerns in that regard. However, as far as the specific tax measures and if one type versus another type was taken into account, the answer is no.

Income Tax ActGovernment Orders

10:45 a.m.

Canadian Alliance

Jason Kenney Canadian Alliance Calgary Southeast, AB

Mr. Speaker, I am rising to speak at third reading stage of Bill C-48, an act to amend the Income Tax Act with respect to natural resources. For several years I have fought, on behalf of my constituents, to obtain tax equity for the natural resource sector.

I represent a suburban constituency in Calgary where by far the single largest employer is the energy sector. Often the energy sector is depicted as some great bogeyman, a great polluter, that rapes the resources of the earth and gives nothing back to society.

In fact, it is an absolutely vital element of our economy, both in terms of growth and employment. If it were not for the energy sector and if it were not for the remarkable technology and ingenuity that makes up our energy industry, we would not be able to live so comfortably in this cold northern climate. We would not be able to do the many things that we take for granted, all of which depend on energy.

The oil and gas sector of our economy is directly responsible for over 60,000 jobs and indirectly creates hundreds of thousands of others. It is an industry that is too often and too easily dismissed or disregarded. When the government adopted income tax changes for corporations in its 2000 budget by reducing over time the general rate to 21%, it failed at that time to provide tax equity for the natural resource sector, which includes more than just oil and gas companies. The natural resource sector also includes mining companies and forestry companies.

I suppose the government's view at that time was that it needed to encourage the new economy in Canada and thought it ought not to provide incentives for the continued growth in the traditional industries which have historically constituted the heart of the Canadian economy, that is to say, primary industries like mining, oil and gas, and lumber. That was a huge mistake.

To this day an enormous percentage of our exports upon which this economy depends come from the oil and gas, mining and forestry sectors. Collectively, those sectors constitute the largest employers in the country. Most of the remote communities in Canada are created and sustained by the non-renewable resource sector. In a sense, our very claim to sovereignty--including many remote parts of the country in the north and from Labrador to British Columbia to the territories--is dependent upon the enormous investments made and risks taken by oil and gas, mining and forestry companies.

This is a sector that we should not dismiss as part of the old economy and a threat to the environment. To the contrary, we should applaud people who work in these sectors for the enormous technological ingenuity that they have developed and applied in the past couple of decades to make the extraction of resources increasingly efficient and environmentally friendly. We should recognize the hundreds of thousands of good paying jobs for working families that these companies helped to create.

That is why I strongly opposed the creation of a two tier tax system in the 2000 budget: one tier for most corporations and another tier for the natural resources field. Unfortunately, it took three years for the government to realize that this inequity was unjustifiable after vigorous lobbying on the part of companies in that sector. It was not until the 2003 budget that the government finally proposed to correct this fundamental wrong.

Unfortunately, it has now taken five years for the government to implement the changes proposed in the 2003 budget, and this is really my concern.

I will support this bill. I voted for it last night along with my colleagues in the official opposition, but it would be our strong preference to see these changes implemented in one fiscal year so that we could move the non-renewable resource sector taxation from 28% to 21% and adopt the exemption for provincial royalties and the credit for mining in one year.

I cannot believe that we must wait five years for the government to do that technically. It is simply stringing out the process of corporate tax equity because it wants the revenue. It wants to make the process as slow as possible so it can continue to generate more revenue from this sector which already pays an enormous tax burden.

Indeed, the ostensible fiscal cost of this tax change will be relatively modest. For the federal government, whose budget is over $160 billion, once fully implemented, this tax change represents only $260 million which, as I pointed out in my question to the hon. Parliamentary Secretary to the Minister of Finance, is a relatively modest amount of money when one considers the kind of waste that we see and the kind of misplaced priorities that we observe on the part of the federal government.

I am pleased that the bill will take into account the costs that are borne by oil and gas companies in paying provincial royalties. Originally, before this bill was introduced, before the 2003 budget the federal government was playing hardball with the oil and gas sector, saying that it will give the sector tax equity at a 21% rate, but the trade-off will be that it will take away the royalty tax credit, otherwise known as the resource allowance.

Collectively these companies pay billions of dollars in royalties to provincial governments. These royalties are an important part of provincial revenue streams. We can see that now in places like Newfoundland and Labrador, and increasingly in Nova Scotia where the provincial treasuries have been enriched by new oil and gas royalty revenues coming on stream.

It was fundamentally unfair for the government to spend three years playing cat and mouse with the energy sector saying that it will give the sector tax equity but only on the face of it, because it will take away the sector's ability to deduct from federal tax the cost of provincial royalty taxes.

I am glad to see that while the government has indeed eliminated the resource allowance here, it has offset the fiscal effect of that by creating in this bill a deduction for provincial royalties against federal taxes. That is absolutely necessary and we will be watching closely to ensure that it remains the case.

Similarly, we are pleased to see that an enriched credit has been provided for mining companies to ensure that the loss of the resource allowance will not negatively affect them. I understand that the net fiscal effect on mining companies will be positive. They will not be net losers as a consequence of losing the resource allowance while moving the rate to 21%.

In closing, we support the principle of the bill. We regret it has taken so long to arrive. We believe that the eight year delay in arriving at tax equity for the resource sector reflects a basic bias that the government has against that sector of the economy, and we regret that. It will continue to be a priority for the Canadian Alliance to press toward lower tax rates across the economy generally, including the most productive sector of the economy, that is, the major employers in the corporate sector.

Income Tax ActGovernment Orders

10:55 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I listened with interest to the member's comments on Bill C-48. I would like to remind him that the enactment includes measures to implement a deduction for crown royalties and mining taxes, to eliminate the resource allowance, to reduce the corporate tax rate applicable to resource income, and to introduce a new 10% tax credit for qualifying mineral exploration expenses.

The member agreed with the changes but had some comments about delays. He concluded that he agreed with the bill in principle, which is what we do at second reading and did at second reading.

This is third reading now. This is not the time to agree in principle. This is the time to agree with the bill, its provisions and its implementation schedule and details.

I would therefore ask the member, is there anything in this bill, not just in principle but in detail, that he has a problem with and if he has one, how would he resolve it?

Income Tax ActGovernment Orders

10:55 a.m.

Canadian Alliance

Jason Kenney Canadian Alliance Calgary Southeast, AB

Mr. Speaker, yes, I do have a problem in detail with the bill, and that is the schedule for its full implementation.

I must admit that I was not fully engaged with this bill at report stage. Had I been, I would have proposed an amendment to move the implementation phase from five years to one year, knowing of course that the amendment would fail.

Knowing that we have a five year implementation scheme in the bill, I will support it nevertheless because I want the resource sector to receive full tax equity as soon as possible.

Income Tax ActGovernment Orders

10:55 a.m.

Bloc

Pierre Paquette Bloc Joliette, QC

Mr. Speaker, I listened carefully to the hon. member's remarks. I am a bit surprised at his conclusion that this reform is a win-win situation and that nobody will lose, when the Mining Association of Canada told the finance committee that it would be disadvantaged by this tax reform. Not by the reduction in the tax rate from 28% to 21%, obviously, but by the changes in other tax rules.

Gordon Peeling, the chairman and chief executive officer of the Mining Association of Canada, told us that if Bill C-48 were not amended, with the impact of this reform and other reforms announced by the government, like the capital tax, the effective tax rate of mining companies will increase by 3% in 2003, 7% in 2004, 10% in 2005, 19% in 2006 and 29% in 2007.

I cannot understand how the hon. member can suggest that this will be good for the mining industry. There is probably no mine in his riding.

Income Tax ActGovernment Orders

10:55 a.m.

Canadian Alliance

Jason Kenney Canadian Alliance Calgary Southeast, AB

Mr. Speaker, I thank my colleague for his comments. He is quite right. There are no mining companies in my riding. However, there are many oil and gas companies. This is why I am so concerned about the oil and gas industry's tax position.

I have to admit that I am indeed not too familiar with the technicalities of this bill as they impact mining companies. This being said, I accept my colleague's remarks. However, I want to say that the government has to address the mining companies' concerns about the tax regime.

Income Tax ActGovernment Orders

11 a.m.

NDP

Brian Masse NDP Windsor West, ON

Mr. Speaker, one of the things that we have learned recently in the oil and gas industry is that the refinery in Oakville is to be closed by Petro-Canada. It will be closing up shop and producing dirty gas until 2005, then importing gas from Europe and distributing it across its grid in Ontario, even though it could be an Esso product or something else.

One of the things that it has chosen not to do is invest in improving the refining operation to ensure it as clean gas.

I would like to ask the hon. member, would this guarantee that Petro-Canada will actually clean up its act, produce clean gas, keep the jobs and give something back to the community as well. Would that happen with this actual measure right here?

Income Tax ActGovernment Orders

11 a.m.

Canadian Alliance

Jason Kenney Canadian Alliance Calgary Southeast, AB

Mr. Speaker, I actually have to admit ignorance about the question the member is asking. It is in the interest of these companies economically to develop technology which is environmentally friendly. One sees the enormous progress they have made historically, but I cannot comment on the particular case the member has raised.

Income Tax ActGovernment Orders

11 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, the member in response to a previous question referred to report stage and the possibility of getting an implementation schedule change. I am sure there is a good reason why we do not take the opportunity for doing those things.

It is kind of sad that in this place sometimes we do not do things because we anticipate that it will not be passed in any event. It really is a disappointment because I believe the important thing is that the item be raised for consideration and shared with members and to explain the significance of the change whether or not it might have a likelihood of passing.

In this place almost anything can happen. There is a full moon over Ottawa right now and I honestly believe that if we ask for it, we just might get it.

On the schedule, I ask the member again, he knows that if someone had moved a motion or considered that same item in committee, another member would not have been able to do it at report stage. It bothers me that somehow members' rights to make report stage motions may be superseded by the fact that someone frivolously raised issues in committee simply to frustrate the ability to do it at report stage.

I wanted to raise that as a comment because it is an element of parliamentary reform that we ought to consider.

Income Tax ActGovernment Orders

11 a.m.

Canadian Alliance

Jason Kenney Canadian Alliance Calgary Southeast, AB

Mr. Speaker, I accept the hon. member's remarks and I agree with the concern he has.

For instance, I am not a member of the natural resources committee and I am not apprised of its business. When amendments are considered there that I have not had the ability to consider or look at, even though the bill concerns me and my constituents, I am essentially put at a disadvantage when the bill returns to the House for consideration at report stage.

I understand why the change in the standing orders was adopted three years ago following what some regarded as the presentation of some dilatory amendments at report stage. However, what is dilatory to the government constitutes legitimate opposition on this side of the House. I think we need to find a better balance in the standing orders so that members like myself can bring forward at report stage in the House substantive amendments which they were not able to address at committee.

Income Tax ActGovernment Orders

11:05 a.m.

Bloc

Pierre Paquette Bloc Joliette, QC

Mr. Speaker, first I would like to congratulate the member for Calgary Southeast on his frankness and also on his good command of the French language.

I am pleased to speak to Bill C-48 because the government is now trying to bring the House to adopt legislation that we feel is not fair for the majority of our natural resources industries, especially in the mining area.

I appreciate the fact that it is quite a technical bill, but it seems to me that if we take a close look at it, it soon becomes obvious that it needs to be amended. Unfortunately, the Liberals did not want to listen to reason in the finance committee.

In fact, in the mining sector, it is not only Quebec that is hurt by Bill C-48, but also Ontario, Manitoba and the Atlantic provinces. It is very hard for me to understand that hon. members representing ridings in Ontario, Manitoba and the Atlantic provinces are not examining this bill to see how it will hurt the mines in their ridings, their regions or their provinces, just because it is rather technical. This is a bill that can be improved; I will return to that later. Passage of Bill C-48 will lead eventually to some mines being closed and jobs being lost. Perhaps some communities will break up because a mine is often the only reason for a community's existence.

As we know, Bill C-48 restructures taxes in the natural resources sector. The argument put forward by the Liberal government—and even by the Canadian Alliance, I have noticed—is that Bill C-48 restores equity between the natural resources sector and other sectors of the economy. Thanks to the former finance minister and future prime minister, the other sectors have enjoyed a tax reduction in the 2000 budget, which lowered the tax rate from 28 to 21% over five years.

And that is the positive aspect of Bill C-48. Now the natural resources sector, like all the other sectors, will benefit from the same reduction, although somewhat later. On that score, I agree completely with the hon. member who preceded me. Thus, Bill C-48 would lower tax rates from 28% to 21% over five years.

The reform of corporate tax structures in the natural resources industry was delayed because it is a special kind of taxation. There is not just the rate of tax on profits. There are also a number of taxes imposed through royalties, for example. That was why the ex-minister of finance and future prime minister delayed the tax reform for natural resources.

They tell us they held consultations. But this consultation must have been, like so many others done by this government, more public relations than true consultation. Thus, we find ourselves with a bill that is totally unfair and unacceptable to a certain number of businesses in the natural resources sector.

Bill C-48 cuts the tax rate from 28% to 21%. As I mentioned, this is the good part of the bill, and the Liberals and the government refer to it repeatedly. But there are three other measures in Bill C-48. We must consider the net effect of this reform, not just one part of this bill.

I want to talk about the three other measures. Other than the tax rate on profits dropping from 28% to 21%, the bill will phase in a deduction for provincial royalties, related to the use of non-renewable resources. This is a new deduction. However, and this is the third measure, the current 25% resource allowance will be eliminated.

The allowance allows natural resource companies to deduct 25% of their profits, on the extraction portion of their activities, prior to paying income tax. This 25% tax credit on resources would be dropped and they would instead be able to deduct provincial royalties.

The fourth measure is a new tax credit for qualifying pre-production mining expenditures, applicable solely to diamond mining and base metal mining.

So, as I mentioned, we cannot talk only about the first part of the reform, to reduce the tax rate from 28% to 21% over five years. The net effect of all four measures must be taken into consideration.

However, according to the Mining Association of Canada, supported by the Quebec Mining Association Inc., Bill C-48 will increase the effective tax rate of many mining companies. I am not saying that the entire industry will suffer as a result of Bill C-48, but the effective tax rate of a large segment of this sector will increase under the proposed reform in Bill C-48.

Mature mines will be harder hit simply because these mines typically pay relatively low royalties in comparison to what other natural resource sectors pay, particularly oil and gas companies.

This is easily understood. There has been competition between the provinces, as well as between Canada and other countries, which has led the provincial governments to reduce their taxes or royalties. As a result, this sector pays lower royalties to use non-renewable resources, and will not benefit from Bill C-48. However, oil and gas companies and the like will benefit greatly.

I can readily understand the member for Calgary Southeast saying, “There are oil and gas companies in my area, and they will benefit from this, so I am not looking any further than that”. But I think that, if we really want this House to represent all of the interests of Canada and Quebec, we must consider the big picture.

Because the oil and gas companies pay a lot of royalties, they will benefit from Bill C-48, while a number of the mining companies, particularly the mature mines, will be disadvantaged by this reform.

Proof of this was given by the Minister of Finance himself, when department officials and the parliamentary secretary appeared before the Standing Committee on Finance. We were told that in all the reform was going to cost the public purse $250 million once it was fully operational.

I have some doubts about that figure. I asked them to tell us the calculation method used for that evaluation, and I am still waiting for the answer.

If we start with the assumption that this figure is accurate, then 80% of that $250 million in tax cuts will, according to the finance department witnesses, go to the oil and gas companies. Imagine. The finance minister himself says that his reform will benefit the oil and gas companies first and foremost, and a mere 20% will go to all the rest of the natural resource companies combined. This is unacceptable.

According to the assessment made by Gordon Peeling, President and CEO of the Mining Association of Canada, overall, with Bill C-48, the mining sector as a whole will benefit from a tax cut of $10 million of that $250 million, or 1/25th of the entire natural resources sector tax reductions. In connection with that $10 million figure, there will be some losers and some winners.

Consequently, this reform is unfair. One of the negative effects of the proposed reform is that by replacing tax credits for resources with royalties instead, income tax rates will increase in several provinces for base metals and for some gold mining operations in particular, which are concentrated in northern Quebec and northern Ontario. It is hard to understand why Ontario MPs would support this bill without hesitation.

Manitoba and the Atlantic provinces will also be disadvantaged by this reform. I am not the only one who thinks so, and it is not just the Mining Association of Canada saying this. In the September 2003 issue of CAmagazine , there is an article by Neil Smith entitled “Energy Update”, and I quote:

All these provinces use federal taxable income as the starting point for the computation of provincial income and allow a deduction for the greater of provincial Crown royalties or resource allowance. For each of these provinces the loss of the resource allowance increases the effective rate as follows: Saskatchewan, 4.5%; Manitoba, 2.9%; Quebec, 2.25%; and Maritime provinces, 3.25% to 4%.

Association epresentatives from the association generally told us that the tax rates would increase by 3% in 2003, 7% in 2004, 10% in 2005, 19% in 2006 and 29% in 2007. And we are being asked to believe that this bill is fair to all natural resource sectors and all the regions in Canada. That is utterly untrue. Quebec and other provinces, in particular, will be disadvantaged.

The federal government will say that the provinces only have to adjust and lower their tax rates. But they should not lower their royalties, because they would put their companies at a disadvantage.

The Mining Association of Canada also said that even if tax rates were changed to take into account the reform proposed in Bill C-48, tax rates would still go up on an average by 2% in 2004, 2% in 2005, 4% in 2006 and 6% in 2007. That would make us less competitive than mining countries where the tax system is much more favourable.

Generally, across Canada, Bill C-48 will result in an effective tax rate increase from 40% to 43%, whereas in China, as you know, the tax rate on mining is quite low, I would even say symbolic. The tax rate dropped from 43% to 34% in Brazil, from 35% to 30% in South Africa, and from 29% to 25% in Finland.

So the government is telling us that by increasing the effective tax rate, especially on the base metal sector, we will increase the competitiveness of our natural resource industry. That is totally unacceptable.

To rectify such unfairness and economic nonsense, I put forward a simple amendment in the Standing Committee on Finance. It was of course rejected by the Liberals out of pure partisanship. I had the support of my Canadian Alliance colleague and I thank him for that.

My suggestion was a phased-in increase in the tax credit for pre-production mining expenditures from 10% to 20%—the fourth part of the reform—over a three year period. That would help reduce the negative impact of Bill C-48 I just talked about at some length, especially in Northern Ontario and Northern Quebec, where base metals are put at a disadvantage by Bill C-48. This would stimulate exploration and might put an end to the current downward trend with regard to our metal reserves. I will quote a few statistics in this regard.

From 1977 to 2001, Canadian copper reserves decreased by 61%; nickel reserves decreased by 44%; lead reserves decreased by 89%; zinc reserves decreased by 71%; and silver reserves decreased by 59%.

With a tax credit for the preparation of mining operations, we could offset the negative effects of Bill C-48 and redress the current drift toward the depletion of our reserves of minable metals.

This could help our regions. Mines are rarely found in the middle of an urban centre; normally, mines are located in outlying areas. Raising the tax credit for qualifying mineral exploration expenses would provide a stimulus to our regions.

The cost of that additional provision in Bill C-48 is estimated at $40 million. Given the surpluses accumulated by the federal government over the last few years, I think that $40 million is a very reasonable price to pay for ensuring equity in such a key sector as natural resources, and particularly the mining industry. Replacing one figure replaced in the legislation would have led to real reform. We proposed 20% instead of 10%, but the Liberals voted against that.

I cannot understand how the member for Témiscamingue, a recent newcomer to the House, can remain silent in the face of something so detrimental to the Témiscamingue. I cannot understand why the member for Abitibi—Baie-James—Nunavik, who is normally so talkative, does not protest against legislation that will be so harmful to the Abitibi mines.

If they are silent, it has to be because they are just yes-men who follow the party line. If they looked after their constituents' interests, they would put the necessary pressure on the government to amend Bill C-48 so that it does not hurt the mining sector, as the Mining Association of Canada and the Quebec Mining Association said it would.

Of course we know that this government heavily favours the oil and gas industry, and this is especially true of the former finance minister and future prime minister. One just has to look, for example, at the total amount of subsidies that this industry has received for its development over the last 30 or 40 years. We are talking here about $66 billion, whereas the hydroelectricity industry in Quebec received nothing, or practically nothing, for its development.

One just has to look also at the preferred status given to the oil and gas industry by the current Prime Minister's office in the form of guarantees with regard to the Kyoto agreement.

However, it is difficult to understand why members would not come to the defence of their communities, their mining industries and their workers. But I am not totally surprised because, since I have had the honour of being appointed to the position of finance critic by the leader of the Bloc Quebecois, there have been many cases where, unfortunately, common sense did not prevail.

In that context, I will remind members of the issue of the GST for school boards. A decision had been made by the courts, but it was reversed here through an act of Parliament. This was a first in Canadian parliamentary history. Quebec school boards were deprived of $8 million, and Ontario school boards were deprived of $10 million.

The fiscal imbalance has put the provinces in dire straits. Nine provinces out of ten will post a deficit next year, while the federal government will continue to rack up surpluses. The Minister of Finance tells us that these surpluses will not be as large, but even though they may not be as large as what the minister had hidden, they will still be very real.

We know that, from 1994 to 2001, this government cut $24 billion from the Canada social transfer, including $8.7 billion for Quebec alone. One third of these cuts were made at the expense of Quebec and the people of Quebec, while we account for only 25% of the Canadian population.

Take the excise tax of 1.5¢ per litre, for example. It was introduced by the former finance minister and future prime minister to fight the deficit. We have been deficit free since 1997, but the tax remains. This is money the government is taking out of the pockets of taxpayers, money that could be used for other purposes.

Let us consider how the government is handling the tax haven issue. It finds nothing wrong with these jurisdictions being used by citizens to avoid paying taxes in Canada. It is therefore not likely in the short term that Bill C-48 will be amended.

We will be voting against the bill at third reading, while hoping that this place will come to its senses as the election nears. Personally, for the well-being of our mining industry in Quebec, Ontario, Atlantic Canada and Manitoba, I hope that the government will change course on this issue, that it will use common sense and make one tiny little change to Bill C-48, raising the tax credit for preparatory activities for mining. We do hope the situation can be corrected.

However, as I said, in the current context, we cannot, in all conscience, support a bill that is fundamentally unfair, even though we agree with some of its provisions, such as the reduction in corporate tax from 28% to 21%.

Let me conclude by reiterating the hope that, on the side of the ruling party, on the Liberal side, members will speak out to have this situation corrected. As I said, it would be very easy. We could have a tax reform in the natural resource sector, one that would be really fair to all natural resource industries in all regions of Canada and Quebec.

Income Tax ActGovernment Orders

11:20 a.m.

Liberal

Guy St-Julien Liberal Abitibi—Baie-James—Nunavik, QC

Mr. Speaker, I have listened carefully to the comments by the hon. member. Some things are true, but I cannot agree with what he has said about us, the Liberal members from Abitibi and the resource regions. I understand that some resource regions have only tobacco growing; others have mining. I am a former miner, myself.

In my remarks, I want to comment on the fact that he said no one has intervened. I have here a letter dated February 21, 2002, in which I told my government, the former finance minister, the Liberal member for LaSalle—Émard, that it was necessary to consider the same sort of reductions for small and medium-size businesses as for other sectors. It was necessary to reduce the general corporate tax rate from 28% in 2000 to 21% in 2004. As for small and medium-size businesses, it is very odd that the Bloc is not discussing what was happening in these companies, that no one took the differences between various industries into account. On the other hand, when we discuss natural resources, these members say we do not stand up for our constituents. We know that there is always room for improvement in bills.

I have here some notes from my friends in the mining sector. They point out the difference between junior and senior mining companies and explain the repercussions of Bill C-48. The issue is this: we know that we must improve the tax system not only for the large, senior companies, but also for the junior companies and small mining corporations.

Still, to go from that to saying that we have not intervened; I am sorry, but this is a false debate at the expense of our resource regions. Because in these regions, when there is no more ore, there is still a problem with respect to the price of metals. Today, our problem is the issue of the rising dollar.

One point is very important: we do intervene. I do not want anyone to say to me that we do not intervene; you are not aware of the letters we write to the minister. We work from within; we work in our ridings. We do not see these hon. members in our regions and our mines very often. I used to be a miner. We do not often see them around Chapais-Chibougamau, or even in Val d'Or. I understand that this bill needs improvement, but it is a first step and I am satisfied. Some things must be amended, but we have to work together.

If they are going to call us liars and say we are doing nothing, they can go to the devil.

Income Tax ActGovernment Orders

11:25 a.m.

Bloc

Pierre Paquette Bloc Joliette, QC

I never called the member a liar, Mr. Speaker. I believe you can attest to that. I said I did not understand why we did not hear the member for Abitibi—Baie-James—Nunavik and the member for Témiscamingue publicly demand, as I am doing, a simple amendment to Bill C-48 to increase the pre-production mining expenditure tax credit from 10% to 20%.

On October 1, 2003, the Mining Association of Canada presented a brief to the Standing Committee on Finance. It was not six months ago or six years ago. It was last Wednesday. The president of the association, Mr. Peeling, came to implore us to make this change; it does not eliminate all the unfairness, but it is the compromise the Mining Association put forward. The only ones who supported the amendment were the Bloc Quebecois members. In the end we got the support of the Canadian Alliance members when they understood what was at stake.

On the Liberal side, one member supported us and another one said—and I can understand him to a point—that he agreed in principle with the amendment, but that he was concerned we might lose the bill. I cannot see how we could lose a bill at this stage, if everybody agreed on a very simple amendment to Bill C-48 and if we had the support of the Liberal majority.

For our part, we work for our people in the regions. I never said the member was a liar. I would have liked him to publicly state his position on Bill C-48. He might do it in the next few minutes. He may have looked at the changes requested by the Mining Association of Canada and the Quebec Mining Association.

People at Cambior approached us. I was secretary general at the CSN and I toured mines in the Abitibi-Témiscamingue region and across Quebec. I know this situation well. It does not prevent me from still standing up for our regions and our mining sector.

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11:25 a.m.

NDP

Brian Masse NDP Windsor West, ON

Mr. Speaker, I want to go back once again to the situation in Oakville. I just received some more information. We know that the Petro-Canada plant there is closing. It is going to produce dirty gas. Instead of actually improving the facility and keeping the jobs, it is going to import gasoline from Europe and re-brand it even though it is another company's gasoline. Unfortunately, we will lose a bunch of workers and on top of that, we will have dirty gas until 2005. It is an unacceptable position from the government because it is almost a 20% shareholder in Petro-Canada.

Based on the estimates that we have right now, if it extends its 2002 targets to this year, it is going to get approximately $7.5 million from this act. This is very insulting in the sense that the government, as a 20% shareholder, will actually receive money back for throwing workers on the street and producing dirty gas in Ontario. It makes no sense whatsoever. It is insulting.

I would like the hon. member to comment on this suggestion. If the government had any integrity, it would give that money to those workers as severance pay. The government is going to get some money back because it is an equity holder in Petro-Canada. Maybe that money should be given back to the workers.

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11:25 a.m.

Bloc

Pierre Paquette Bloc Joliette, QC

Mr. Speaker, on the issue of the closing of the Oakville refinery by Petro-Canada, I also think this is unfortunate. Even though the company is claiming that it is transferring a part of its Oakville activities to Montreal, it is not fooling anyone.

The refinery capacity will be reduced in Canada and in Quebec. What will be the result? This will simply lead to higher prices, while the federal government is refusing to take its responsibilities concerning competition in this industry.

The Minister of Industry tells us that the retail price is under provincial jurisdiction, and this is true. But the root problem is refining. Refining is controlled by major companies, including Petro-Canada. By closing the Oakville plant, the company has reduced supply and found another way to increase its profits by affecting the whole chain, up to the consumer.

In this sense, the member can be sure that the Bloc Quebecois supports efforts by the workers and people of Oakville to keep this refinery open.

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11:30 a.m.

Liberal

Dan McTeague Liberal Pickering—Ajax—Uxbridge, ON

Mr. Speaker, I listened closely to the speech by the hon. member opposite. I am very interested in the fact that the hon. member from the NDP spoke about the dirty gas and all the other problems that would be caused by the closure of this facility.

To the hon. member who answered his question, I know one of the reasons why the number of refineries in this country has dropped dramatically. I am very disappointed by this situation, and obviously I am not justifying it.

Two or three players control this industry in each region. Petro-Canada is also a serious cause for concern in Newfoundland, where it just closed not only its refinery but also its gas station franchises.

One of the legitimate reasons for this closure is simply the amount of sulphur in the gas. To obtain a profitable product, there must be a balance with the United States, and there are other products available with 30 million particles per million.

As the hon. member knows, Canada went ahead on the issue of sulphur reduction in gasoline. It is one of the reasons the major oil companies have decided they may shut this. Does he not see a concern as far as going ahead of the international market on sulphur in gasoline and that this is maybe one of the reasons it is so expensive?

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11:30 a.m.

Bloc

Pierre Paquette Bloc Joliette, QC

Mr. Speaker, I am very familiar with this issue, but it is a bit troubling that a company, in which the federal government is a shareholder, did not take the necessary measures over time to ensure that its technology and production methods complied with current and future environmental regulations.

Surely there is a lesson in all this, also in terms of the union. Obviously, I am not familiar with the problem in Oakville, but when I was at the CSN, we told our unions to be extremely vigilant on the issue of technological investments so as to be on the cutting edge and not get caught in a situation where, for environmental or other reasons, a facility is forced to close or people claim that things are bad enough for it to close.

In the Oakville case, surely with the necessary technological and environmental investments, refining capacity could be maintained. Everyone knows that, when supply drops and demands remains constant, prices increase. This is a simple law of economics that everyone subscribes to. What bothers me is the Canada-wide decrease in supply.

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11:30 a.m.

Progressive Conservative

Rick Borotsik Progressive Conservative Brandon—Souris, MB

Mr. Speaker, I am pleased to speak at third reading of Bill C-48. My colleague the member for Kings--Hants has had carriage of this piece of legislation. He is now with the finance committee somewhere across the country and it has fallen to my delicate hands to take it to the next stage.

Our party will be supporting Bill C-48. I appreciate that the members from the Bloc, and certainly the member speaking after me from the NDP, have different philosophical positions with respect to business management and labour. Certainly their philosophical positions will come out in their opposition to this piece of legislation. The NDP and the Bloc make no bones about it that they are not friends of industry. They are not friends of business. They are not friends of being able to generate the economy in the natural resources sector.

I appreciate my colleague from the Bloc helping me in protecting Manitoba with respect to this legislation. He indicated many times that Manitoba would be the net loser should this bill go forward. I do not agree with that. I believe in competition. My province of Manitoba has certainly seen the benefits and the opportunities in the mining sector. It sees the benefits and opportunities certainly in the natural resources sector. As a matter of fact, the majority of Manitoba's GDP is from natural resources, whether it be agriculture, mining or forestry. We see that there are advantages.

As a matter of fact, Manitoba has put in quite a number of changes to its own tax system, tax rate and royalty system to encourage mining. We have some very large mining operations in Manitoba with Inco and Falconbridge. We want to continue to be able to compete in the world market. In order to do that Bill C-48 corrects some of that inequality.

We were somewhat dumbstruck when it was brought forward in the 2000 budget that there would be a reduction in the general corporate income tax rate from 28% to 21%. We were actually thunderstruck when we found out this did not include the natural resource industry. Oil and gas, minerals and mining were excluded from the 2000 budget. I do not know whether the NDP at that time stood up and said wow.

There is a huge industry that has been neglected. Bill C-48 brings that back into line. There is an equity issue that has to be resolved and Bill C-48 resolves it by adding the mining sector to the reduction in the tax rate from 28% to 21%.

There are other issues with respect to the legislation. There are phase-outs. Certainly the 25% phase-out is going to have some concerns. My colleague from the Bloc spoke to that. Manitoba will have a reduction in revenue streams because of that tax reduction.

That may be true, but we also have enough foresight to recognize that there should well be revenue streams or revenues increased by encouraging exploration, by encouraging mining operations to come into Manitoba, northern Manitoba specifically, and by encouraging these industries to not only explore but process the raw materials they extract from the earth. This is what we were built on and this is what we want to continue to do. We want to encourage that so there will be more union jobs developed in Manitoba, so union jobs can be increased in the sector that this is trying to assist. Bring equity back into the system.

I hear somewhere in the background the member from Windsor suggesting perhaps that is not the case. As I said at the outset, there are philosophical differences. I believe in the private sector developing economy. I believe in that. Also I believe that profit is not a dirty word. That may send them into apoplectic shock, but the fact is there has to be profit in a sector.

There has to be profit in an industry in order for that industry to reinvest in itself and reinvest in its employees, in their training and their pension plans. That is what the economy is all about. I do not have to lecture the member for Windsor West on economics 101, but I do have to lecture the member and say that the inequalities in the industrial sectors do not bode well for Canadians.

We do have tough competition in the oil and gas and the mining sectors. We have competition offshore. China has some very strong advantages compared to us. The labour costs in China are substantially less than they are in Canada. We have to compete in the way we can and that is obviously in our tax rates. We cannot take from the industries so often that they are not able to reinvest back into this area.

I appreciate the Bloc's position on most of the issues. The Bloc members are suggesting that there will be revenue losses. I appreciate the Bloc trying to protect Manitoba, but we really do not need that protection. We can look after ourselves.

More than that, I am sure the Bloc's concern is more about the federal-provincial jurisdictional issues as it always is. Obviously the Bloc has some difficulties with the federal government getting involved in any kind of provincial jurisdiction. This is one of those areas. When Bill C-48 becomes law, it will be necessary for the federal government to work with the provincial governments to ensure that the resulting provincial revenues are redirected to the affected mining industry.

Basically, my good friends in the Bloc are telling the federal government not to step on Quebec's jurisdictional toes. In fact, this is a federal responsibility. Bill C-48 is a federal responsibility in setting tax rates for the industry. It is up to the government to set those rates.

There is never any perfect legislation. We certainly know the government is not perfect; that is an understatement. We know there could have been amendments--

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11:35 a.m.

Liberal

Dan McTeague Liberal Pickering—Ajax—Uxbridge, ON

Shame. Say it is not so.

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11:35 a.m.

Progressive Conservative

Rick Borotsik Progressive Conservative Brandon—Souris, MB

Now I am even getting heckled from the government side, Mr. Speaker. However those members should be our friends on this issue because Bill C-48 has to go through.

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11:35 a.m.

Liberal

Bryon Wilfert Liberal Oak Ridges, ON

That is the most intelligent thing you have said all day.